High retail rents making New York a chain-store city

Small shops are being squeezed out of New York City by national chains that can afford the high retail rents.

Small shops are being squeezed out of New York City by national chains that can afford the high retail rents. (MARY ALTAFFER, ASSOCIATED PRESS)

DEEPTI HAJELA, JENNIFER PELTZAssociated Press

Is NYC turning into a chain store city?

New York is increasingly becoming chain store city.

Looking for a "Seinfeld"-style coffee shop? It's sharing the city with 280 Starbucks and more than 530 Dunkin Donuts.

A good neighborhood deli? It's competing with some 460 Subways.

And the corner store well may be a Chase bank or Walgreens.

Amid eye-popping rents and the demise of a number of well-known local haunts, some activists and lawmakers are proposing new rent-renewal rights for small businesses that they see as saving the personality of the city.

"To me, the streetscape of New York City is what sells New York City. To make a city of chain stores would not be inviting for residents or visitors," said Manhattan Borough President Gale Brewer, among those making the proposals.

"Yes, they go to Times Square, but then they get so excited when they go to Little Italy or Chinatown … that's what makes New York."

But in a city where small businesses — and commercial rent control proposals — have come and gone for decades, the buzz about saving storefronts is spurring debate between those who feel New York's distinctiveness is at stake and others who say the changing retail landscape represents the free market at work.

To Sam Shelanski, shops like Pearl River Mart, an emporium of all things Chinese, are a New York highlight. But the store recently said it might close later this year after 44 years in various locations because its rent was poised to jump from about $110,000 to more than $500,000 a month at its current SoHo home.

"It's another piece of what makes New York so unique and so colorful that is now gone," said Shelanski, a regular visitor from Fort Collins, Colo.

Rent hikes and lease clashes have become so commonplace that an online "Save NYC" campaign has emerged featuring videos lamenting a litany of beloved storefronts and eateries that have closed their doors.

Crusty Manhattan burger joint Big Nick's closed in 2013 after 51 years; Colony Music, a Times Square store with a famous fan base, shut down in 2012 after 64 years; and 78-year-old dive bar the Subway Inn lost its Manhattan space last year, though it has reopened nearby.

But to landlords and real estate brokers, a booming city that draws big retail benefits both residents and visitors, and government has no business trying to protect one type of shop over another.

"The market is going to dictate whether or not a mom-and-pop's going to survive … and when we try to stop that from happening, we're going to hurt the economy of New York," said Steven Spinola, president of the Real Estate Board of New York, a major landlords' group.

Making lease renewals easier can make it harder for new shops to find space, says Greg David, a former Crain's New York Business editor who teaches journalism at the City University of New York. "The simple answer that mom-and-pops will win and national chains will lose is simply superficial," he says.

New York is home to some of the world's most expensive retail real estate. Asking rents in the prime of Fifth Avenue have risen about 50 percent in five years to top $3,100 per square foot, or $6.2 million for a space the size of an average Starbucks, according to real estate firms CBRE and Cushman & Wakefield.

Manhattan landlords ask an average of about $94 per square foot per year, compared to $34 in San Francisco, $13 in Atlanta and $12 in Kansas City, Mo., Cushman & Wakefield says.

National chains have expanded in New York City for six straight years, boasting 7,473 locations last year, according to the Center for an Urban Future, a public policy think tank.

Chains have a role to play in the city and have added value, such as national grocery stores that have offered more food choices to residents, said the center's executive director, Jonathan Bowles. But in high-profile neighborhoods such as SoHo, the Upper West Side and Chelsea, so many national retailers have gone up that "it's become very difficult for any independent retailer to afford space."

The city debated but ultimately defeated a plan to cap some commercial rent increases in the 1980s.

The new proposals wouldn't actually set store rents. Rather, they would give tenants and landlords recourse to mediators or arbitrators if there was a lease-renewal dispute. If mediation didn't work, Brewer's proposal would entitle tenants to a one-year extension with a 15 percent rent hike, allowing time to find new space.

The city Small Business Services Department says it is "evaluating a range of potential new programs and strategies" to help small businesses compete in the face of real estate and other pressures. The city already offers free legal assistance, loan application help and incentives for small businesses.

For family-owned toy store West Side Kids, the strategy is simply to stay in the Manhattan space it's been lucky to rent for 34 years at moderately rising rates. A move would probably double rent, owner Jennifer Bergman says.